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Isle of Man changes gambling rules

by Lucas Everidge

Isle of Man - Officials on the Isle of Man announced the reversal of a four-year-old policy to now allow Internet casinos based there to accept bets from American residents. The change, affects only a handful of Internet casinos. However the move adds another step to the emerging trade battle between the United States and much of the world over Internet gambling.

Washington argues that U.S. laws prohibit Internet gambling, and some U.S. states have been pursuing financial institutions that facilitate online gambling transactions.

The decision by the Isle of Man occurs amid a trade dispute over Internet gambling between the United States and the tiny Caribbean country of Antigua and Barbuda. The island nation filed formal complaints with the World Trade Organization which has provoked comparisons to the mouse that roared. The small country takes Washington to task in its charge that it violates its trade obligations by prohibiting US residents from placing wagers over the Internet. Both countires are members of the World Trade Organization.

The WTO issued a preliminary ruling in November that favored Antigua and Barbuda. The United States filed a formal notice of appeal last Friday, asserting that the country's long-standing trade policy and social mores are consistent with its prohibition against online gaming.

Despite the prohibition, Americans wager more online each year than do residents of any other single country. Consequently, online casinos and the jurisdictions that license them are eager for the U.S. business.

The tiny island regulates
casino gambling

The policy reversal is significant because the Isle of Man, which first started licensing Internet casinos in 2001, initially sought to attract blue-chip gambling operations by defining itself as a jurisdiction offering rigorous regulation.

Initially, that policy seemed to work. Several of the world's largest gambling operations, including MGM Mirage, purchased expensive licenses to operate online casinos in the island. But business was not as successful as expected causing six major casinos, including MGM, to relocate from the Isle of Man or shutter their Internet operations altogether.

Last December, the island's Council of Ministers voted to reverse the policy discouraging online casinos located there from accepting bets from the United States. Tim Craine, the head of e-business for the island, said that the Isle of Man felt the policy change would help attract new casinos, and the licensing and tax revenue they provide.

"There's a lot of business looking to relocate to a reputable, regulated jurisdiction," he said, noting that in particular, numerous poker rooms are looking for a new jurisdiction. "We're hoping to capitalize on that business," said Craine.

Craine stated that the policy change affected only wagers placed on casino games and in poker games, but not sports bets. The island's regulators makes that distinction because it believes that U.S. law prohibits sports betting online, but not casino wagering.

But U.S. prosecutors argue that casino games are also prohibited under United States federal law; in either case, numerous state laws expressly prohibit any gambling operations in the state that the state's Legislature has not expressly authorized.

The United States must file its first brief in the appeal on Friday, and the WTO has 90 days from the appeal notice last Friday to issue a decision in the case.

Industry analysts report that in 2004 approximately $7.6 billion was lost in wagers over the Internet. The group said about half that amount was lost by residents of the United States, a disproportionate sum attributable in part to the relatively high percentage of Americans who have Internet access.

Numerous countries, including Britain, license and regulate online casinos. The level of regulation differs widely from country to country. Some countries enforce more rigorous regulations as a way of helping the casinos that locate there to establish an identity as a reputable casino.

The policies of those countries also differ as to whether they accept bets from Americans. What they have in common, though, is a desire to attract more Internet casinos, industry analysts and executives said.